Ostensibly, a HOA does beneficial things, ranging from grounds-keeping to major maintenance. The townhouse I'm currently renting is connected with five others under an HOA. The HOA recently dealt with some major roof repairs across all six units (which is to say, one of the neighbors spent an awful lot of time on the phone to make it all happen). For high-rise condos, this sort of thing is even more important, to pay for major mechanical upgrades and so forth.

As such, I'll stick with my assertion that a HOA is really just another smaller form of government. And all of the problems that can happen with an HOA (e.g., people who just get off controlling their neighbors) can also happen in larger governmental bodies.

Now, if you treated HOAs as nothing more or less than local governmental bodies, that could lead to some interesting fall-out, i.e., state regulation of what a HOA can and cannot regulate, how it must deal with elections, and so forth. I believe, for example, that New York has extensive regulations along these lines for how co-op boards are managed.